Upwardly mobile

More and more motorists can't wait to slip into the lap-sash of luxury. TOBY HAGON delves into the psyches of would-be owners - and makers - of the poshest cars.

24 August 2010

Upwardly mobile

Never before has the badge on the front of a car been such an important part of neighbourhood politics and gloating.

Image, it seems, is all-important. Whether it's the weekday professionalism and weekend fun of a Porsche, the Teutonic elegance of a Mercedes-Benz or the rugged appeal of a Range Rover, people use their cars as an extension of their personalities. And they're prepared to pay for it.

As is the case with expensive watches and designer shoes, keeping up with the Joneses is a crucial part of 21st-century traffic.

Which could explain why the number of new luxury cars being driven on our roads has increased by a whopping 129 per cent in less than a decade. In an overall market that's grown a still-impressive 46.9 per cent over the same period, it represents a substantial shift in the types of vehicles we're buying and how much we're prepared to pay for them.

In 2003, Mercedes snuck into the top 10 selling brands locally, only to be edged out last year by budget brand Kia.

It's an impressive effort, even when you take into account that roughly a quarter of Mercedes-Benz's sales are for various vans and trucks.

"If you look at the development of the Australian economy, it was an outstanding performance - people made a lot of money on the property market in particular," von Sanden says.

BMW's general manager of marketing, John Kananghinis, agrees that the economy has played a huge part in boosting interest and sales in the luxury end of the new car market, driving BMW's fortunes up 88 per cent since 1996.

"The economy has been on the up and up and we have had low interest rates, both of which inspire confidence in large-ticket items," Kananghinis says, also pointing out that the strong Australian dollar has improved the affordability of imported products.

"In short, the relative affordability of cars has continued to increase," he says.

But von Sanden says that the desire for luxury goods is not limited to the car market.

"In general, the desire for luxury goods is in line with the relatively high income and it all makes it interesting for more people to get into the luxury segment," he says.

Kananghinis agrees: "It all comes down to the continuing growth in discretionary income and wealth in the overall marketplace - those demographic trends that are being reflected [in what people are spending on]. And that's also partly due to a higher proportion of better-educated people in the community." Under the concept of a "hierarchy of needs", Kananghinis says, "as more people are able to deal with their basic needs early on in their earning lifetime, they're then fulfilling [a desire for] more premium goods in the rest of their life, be it education, their houses, travel, food, wine or a car. Basically they're looking to improve on the things that interest them the most."

He believes it is about more than just expressing a desired image. People spend a lot of time in their cars, so they want the experience to be as comfortable and familiar as their home surroundings.

"You spend so much time using it [your car], your entire lifestyle is predicated on using it," he says. "So if you can afford the luxury of a premium motoring opportunity, more people are doing it." But there is more to it than desire and car makers are broadening their vehicle line-up and giving people a wider choice, von Sanden says.

"We expanded out range and went into all the different niches," he says. "If you look at the line-up today, there is basically no niche uncovered." And that, Kananghinis says, has also been instrumental in the growth of luxury vehicle sales. "There has been increased activity in the prestige marketplace - with much more product - all of which stimulates the market and creates interest."

So how important is image in luring people to splash out big money on a car?

"Image is increasingly important," von Sanden says. "There's probably a lot of factors, but individuality becomes more important - people want to distinguish their lifestyle from other people's lifestyle, and brand, in general, plays an important role here."

Still, despite the unprecedented growth, car makers are also wary of selling too many cars to the point where it can potentially dilute the brand. After all, if everyone drove a Ferrari, not many people would be turning away from their lattes to watch one cruise down Norton Street.

"There is certainly a saturation point," Kananghinis says. "But we haven't reached it yet. Our overall volume expectations worldwide see us growing to about 1.4 million cars [annually] - that would still put us below 2 per cent of the world market. So 98 per cent of people are buying something else. So there is still significant growth potential." Which would explain why BMW recently introduced its entry-level 1 Series as a rival to other entry-level prestige brand players such as the Audi A3 and Mercedes A-Class.

Von Sanden says it is important that a luxury car still delivers what the public expects of the brand.

"With a brand, you have to start from the foundation," he says. "Our brand, and the strength of our brand, was clearly created with our core values. But the exclusivity of the brand must never be reduced."

So can a premium player be too popular? "Yes, but it's not possible to link that to a number," he says. "We have to follow our premium strategy religiously. So in every segment we compete we offer the premium product - this is our strategy."

PRESTIGE BRANDS

The winners and losers so far in 2005

Make

*2005

*2004

Diff +/-

Alfa Romeo

381

431

-50

Audi

1151

704

355

BMW

3641

3748

-107

Chrysler

525

563

-38

Citroen

596

617

-21

Jaguar

224

310

-86

Jeep

1311

1222

89

Land Rover

524

860

-336

Lexus

1294

1181

113

Mercedes-Benz

3004

3528

-524

MG Rover

115

166

-51

Mini

598

405

193

Peugeot

1642

1550

-92

Renault

821

759

62

Saab

322

544

-222

Smart

179

94

85

Volkswagen

2883

1864

1019

Volvo

594

728

-134

Source: Federal Chamber of Automotive Industries *First quarter

How the main players compared in 2004*

BMW

14,860

Mercedes-benz

12,715

Lexus

5009

Holden Satesman/Caprice

4651

Audi

3701

Volvo

2802

Ford Fairlane/LTD

2190

Saab

1848

Alfa Romeo

1800

Porsche

1264

Jaguar

1015

Range Rover

398

Bentley

126

Maserati

93

Ferrari

69

Lamborghini

31

Rolls-Royce

8

Maybach

5

* Only includes models regarded as prestige, sports or luxury by the Federal Chamber of Automotive Industries not all brands reported. Source: VFACTS

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